Hallmark Specialty Insurance Company v. Mr Luxory Motor Inc

[5] 6 UNITED STATES DISTRICT COURT 7 SOUTHERN DISTRICT OF CALIFORNIA [8] 9 HALLMARK SPECIALTY Case No.: 3:21-cv-1149-L-JLB 10 INSURANCE COMPANY, 11 Plaintiff, ORDER ON MOTION TO DISMISS 12 v. COUNTERCLAIM [13] MR LUXORY MOTOR, INC., 14 Defendant. [15] 16 Pending before the Court is Counter-Defendant Hallmark Specialty Insurance 17 Company’s (“Hallmark”) motion to dismiss the counterclaim. Counter-Claimant Mr. 18 Luxory Motor, Inc. (“MLM”) opposed, and Hallmark replied. The Court decides the 19 matter on the papers submitted without oral argument. Civ. L. R. 7.1. For the reasons 20 stated below, the Court GRANTS the motion. 21 Background 22 This action relates to an insurance coverage dispute. MLM, a car dealership, 23 alleges it had an insurable interest in a vehicle that was wrecked during a test drive. It 24 asserts Hallmark, the insurer, failed to pay the amount required under their insurance 25 policy. 26 MLM’s counterclaim against Hallmark asserts several claims: (1) breach of 27 contract, (2) breach of implied covenant of good faith and fair dealing, (3) declaratory 28 relief, (4) fraud, and (5) unfair competition law. 1 Legal Standard 2 A complaint must contain a “short and plain statement of the claim showing that 3 the pleader is entitled to relief.” Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009) (internal 4 quotation marks and citation omitted). “A pleading that offers ‘labels and conclusions’ or 5 ‘a formulaic recitation of the elements of a cause of action will not do.’” Id. at 678 6 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). The allegations “must be 7 enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555 . 8 The Court must accept as true all factual allegations in the complaint and draw 9 reasonable inferences from those allegations in the light most favorable to the plaintiff. 10 See Skilstaf, Inc. v. CVS Caremark Corp., 669 F.3d 1005, 1014 (9th Cir. 2012). 11 Discussion 12 To state a breach of contract claim, MLM must plead: (1) an insurance contract; 13 (2) their performance or excuse for nonperformance; (3) Hallmark’s breach; and (4) 14 resulting damages. See San Diego Hous. Com v. Indus. Indem. Co., 68 Cal. App. 4th 526 , 15 536 (1998). 16 There is no dispute as to the first, second, or fourth element. But there are no 17 factual allegations to support the third. MLM did not attach the insurance policy as an 18 exhibit or plead the provisions Hallmark is alleged to have breached.1 The counterclaim 19 contains only vague and conclusory allegations as to the insurance policy. (Counterclaim 20 at ¶ 11) (“the damage is covered by the coverage specified in the [insurance] policy.”)2 21 That does not meet the pleading standard. Iqbal, 556 U.S. at 677-78 . For this reason, the [23] 1 The Court does not consider any new allegation in the Opposition. See Schneider v. [24] California Dep't of Corr., 151 F.3d 1194 , 1197 n.1 (9th Cir. 1998) (“new” allegations 25 contained in an opposition are irrelevant for Rule 12(b)(6) purposes, and a court may not consider them). Although Hallmark relied on an exhibit from its complaint to support its [26] motion to dismiss, MLM disputes that is the insurance agreement. (See ECF 9, 27 Opposition at 4, n.1). 2 While there is no requirement that MLM attach the insurance agreement as an exhibit to [28] 1 Court DISMISSES causes of action one through three (breach of contract, implied 2 covenant of good faith and fair dealing, and declaratory relief claims).3 3 MLM also asserts a fraud claim against Hallmark. Under California law, MLM 4 must plead: (1) misrepresentation of a material fact, (2) with knowledge of its falsity, (3) 5 with intent to defraud, (4) justifiable reliance on the misrepresentation, and (5) resulting 6 damage. Lazar v. Super. Ct., 12 Cal.4th 631, 638 (1996). 7 The claim is based on Hallmark’s alleged failure to disclose its non-admitted status 8 (i.e., that it is not state registered). (Counterclaim at ¶ 73) (Hallmark “concealed from 9 [MLM] [its] non-admitted insurer status.”) Even accepting that as true, MLM fails to 10 allege any facts to show materiality, intent, its reliance on Hallmark’s purported registrant 11 status, or damages resulting from the alleged misrepresentation. MLM also fails to set 12 forth the requisite specificity required under the Federal Rules. See Fed. R. Civ. P. 9(b); 13 Moore v. Kayport Package Express, 885 F.2d 531 , 540 (9th Cir. 1989) (“while statements 14 of the time, place and nature of the alleged fraudulent activities are sufficient, mere 15 conclusory allegations of fraud are insufficient.”) For these reasons, the Court 16 DISMISSES the fraud claim. 17 MLM also asserts a claim under Business and Professions Code section 17200 18 (Unfair Competition Law) against Hallmark. The claim is based on the above conduct. 19 (Counterclaim at ¶ 88) (Hallmark’s “bad faith insurance practices set forth above 20 constituted unlawful, unfair, and fraudulent business acts and practices.”) Based on the 21 above ruling, the Court DISMISSES the unfair competition law claim. [24] 25 3 MLM’s request for declaratory relief might also be superfluous due to its breach of contract claim and Hallmark’s complaint. See, e.g., United States v. Washington, 759 26 F.2d 1353 , 1357 (9th Cir. 1985) (“declaratory relief should be denied when it will neither 27 serve a useful purpose in clarifying and settling the legal relations in issue nor terminate the proceedings and afford relief from the uncertainty and controversy faced by the [28] 1 Because MLM might cure the above deficiencies if given leave to amend, the 2 || Court GRANTS its request. See Fed. R. Civ. P. 15; Lopez v. Smith, 203 F.3d 1122 , 1127 3 |} (9th Cir. 2000). 4 Conclusion 5 For the reasons stated above, the Court GRANTS Hallmark’s motion. MLM’s 6 || counterclaim is DISMISSED with LEAVE TO AMEND. MLM has until January 10, 7 ||2022, to file an amended counterclaim. 8 IT IS SO ORDERED. 9 || Dated: December 23, 2021 pee ep? 11 H . James Lorenz, United States District Judge